What is a Contractor of Record (COR) and How Does it Work?

Independent contractors are a valuable part of the workforce, especially if you're a growing business requiring flexible project help around the world. As your list of contractors grows, so does the complexity in managing payroll and compliance.

One solution is to partner with a Contractor of Record (COR). Let's explore what a Contractor of Record is and how it can lead to a more efficient contractor management system for your team.

What is a Contractor of Record?

A COR is a third-party service provider that takes care of all the administrative and legal paperwork regarding your independent contractors. At the same time, your business gets the benefit of the contractor’s work. CORs can hire contractors around the world. They can also manage independent contractors across state lines.

How Does a COR Work?

A COR acts as the legal intermediary responsible for the contractor management system. Here’s how they work in practice:

• Onboarding and Contracts: The COR understands what an independent contractor agreement is and prepares each contract as necessary. The COR also collects essential tax forms and verifies that all documentation is complete and compliant.

• Payroll Administration: One of the key responsibilities of the COR is to process payments on the contractor management platform and assist with tax reporting.

• Regulatory Compliance: The COR stays informed about labor laws and handles misclassification concerns. They also manage reporting requirements, reducing the administrative workload for your internal team.

• Risk Management: By handling these complex tasks, the COR helps protect your business from compliance missteps.

Benefits of Using a COR for Your Business

A well-managed COR can offer significant advantages to your contractor management system. Here are some of the key benefits that they provide:

Flexibility

Using a COR enables you to adjust your workforce swiftly, allowing you to meet evolving project demands without incurring extra overhead.

Compliance Confidence

Employment and tax laws vary by location. The COR’s job is to stay up to date on these rules and apply them correctly, giving you peace of mind.

Risk Mitigation

Using a COR can help lower the risks of employee or contractor misclassification, a common challenge for many businesses. It can also ensure compliance with changing state and global regulations.

With all the different types of workers out there, figuring out how to correctly classify yours can be confusing. This guide can help.

Time Savings

Outsourcing contractor management and payroll frees up your internal Human Resources (HR) or finance teams to focus on bigger-picture initiatives.

How to Set Up a Contractor of Record System

Setting up a COR arrangement doesn’t have to be complicated. Here are a few steps to help you get started:

1. Identify Your Needs Start by thinking about which roles and regions you want your COR to cover, either presently or in the future. This will help you find a service provider who can handle the number of independent contractors and your work areas.

2. Choose Your COR Look for a trusted provider with experience in contractor management and strong compliance know-how.

3. Develop Clear Policies Work with your COR to establish onboarding procedures and payment schedules for your contractors. Keeping things transparent and communicating expectations helps build trust with your contractor team.

4. Communicate With Your Team Ensure your managers know how the COR process works. A smooth handoff ensures clear communication and helps projects continue to move forward without disruption.

5. Monitor and Review Keep track of how your COR arrangement is working. Use your contractor management platform to stay on top of payments and contracts, so you can make improvements as needed.

Common Misconceptions About Contractors of Record

As you delve deeper into the subject, you may encounter a few misconceptions about what a Contractor of Record is and how it works. Here are some of the key misconceptions to look out for:

• The COR will replace the internal team: The COR doesn’t replace your managers or HR. Instead, they take care of the administrative and legal aspects of managing independent contractors, allowing your team to focus on work management and fostering strong relationships.

• The company will lose control over contractors: The COR manages contractor agreements and payments, while you continue to oversee the project scope and deliverables. Your business stays in control of the work relationship, while they handle the administrative side.

• The COR is meant for big companies: Any business that hires independent contractors across state lines or borders, including startups and large enterprises, can benefit from the added peace of mind and efficiency the COR provides.

How Justworks Supports Your COR System

A Contractor of Record can be an invaluable partner for your business if you rely on independent contractors. Justworks complements the COR by simplifying hiring, onboarding, and payroll processes. We help you stay compliant and provide an all-in-one HRIS to keep your operations organized. Get started with Justworks today.